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  Jeff Bailey   8/9/02,  5:38:16 PM
Jeff: The DIA gave a buy signal breaking about 88 on the P&F chart, but it sure did not hold. So temping to short this market into the weekend. Any thoughts using P&F Charts on the DIAs?

Very tempting to short the DIA here. Note that DIA did give a "buy signal" back at $94, just at downward trend, then got "whacked" lower. I too am "skeptical" here at $88 as current DIA rally is righ into the triple-bottom sell from July (after red 7).Link

Also a bit "interesting" is that the Dow Industrials Bullish % ($BPINDU) is right back at 32%, and currently "bull alert," but so far, just not enough bullishness to achieve "bull confirmed" at 34%. Remember, this is just 30 stocks, so each buy/sell signal from the stocks has 3.33% weight as it relates to this very, very, narrow bullish %. This is the "type" of trade right now that if initiated would probably be wise to only initiate 1/4 or 1/2 position in.

I think Jim Brown "cringed" at my comments regarding insight from Bob Pisani from CNBC at the NYSE, but while I don't agree with EVERYTHING he says, I will test against what he says with what I see in the MARKET. However, his observation from talking with floor traders that there just aren't a lot of "firm" orders in trader's books is telling and I agree with that observation due to the wilder swings we've seen in the Dow Industrials lately.

One "reason" I just couldn't take this type of "triple-top" buy signal in the DIA today is that Treasuries saw extensive buying. Could the 10-year ($TNX.X) have kept a trader from "buying" the DIA at $94 back in July (after red 7), when compared to the $TNX.X p/f YIELD chart after its (red 7)? Link

Perhaps, as YIELD chart had given sell signal (money going into this bond) and may have hinted that stocks were going to be "starved" of cash.

So why did the DIA give a "buy signal" in July at $94? I'm thinking short covering, just as I think today's action and past couple have been short-covering driven. That $94 was traded on July 5th. Do you remember what was going on then? If you remember, "trader talk" prior to 4th of July was that bullish investors were concerned about potential terrorist attacks prior to the July 4th holiday and the market had been selling into that holiday. When July 4th passed without an attack, boom, shorts covered.

Now, trader talk is that shorts are covering (and it sure seems like it from my seat as cash went back into bonds today) into next weeks Fed meeting. What a bull needs to be cognizant of is what happens once interest rate decisions are made.

My thought is this. If Fed cuts rates, then current action from bond market is "front running" a Fed decision of rate cut right now. Kind of like ... "get higher YIELD Treasuries while I can." BUT .... if Fed doesn't cut rate, THEN I'd expect to see YIELDS sell off. Stocks probably pull back from bullish "disappointment", but that may create the bullish entry point.

I wrote some time ago, that if the Fed cuts rates, then the Fed is worried about the economy. It's when the Fed begins to RAISE rates that the economy begins to really strengthen.

If the Fed doesn't cut rates next week, then some of the puts I currently hold that have the underlying stock exhibiting greater strength than I originally planned, I can hopefully close those puts at a support level, for smaller loss depending on how the Treasury market responds.

If the Fed does cut rates next week, and bonds YIELDS stay where they are or head lower, then my current feel is that is BIG negative for stocks. At that point, bond market has to be thinking further cuts are coming. Why would the Fed continue to cut rates? Because it feels the economy is weakening.

Now, traders may disagree with the thought that the bond market is good at forecasting future Fed moves, but its interesting to go back and look at the 13-week YIELD ($IRX.X) and calculate the bearish YIELD objective dating clear back to December 2000 at 5.85% (58.50 on p/f chart) Link At its December 19 2000 meeting, the FOMC decided to leave rates at 6.5% Link

One can only wonder what the trader was thinking that bought the 13-week YIELD at 5.85% back when the Fed rate was 6.5%. Hmmmm.... maybe he/she was thinking "Fed cut" or "weaker economy" in the future and had sniffed out the January 3rd 2001 unscheduled Fed announcement? Link

Was a Fed rate cut "bullish for equities" as money poured into the shorter-term Treasuries? If memory serves me correct (OK, I cheated on this one) the DIA gave a triple-top-buy signal at $110, but a month later was giving a triple-bottom sell signal in February at $100 as the DIA fell some 9% to $91 by March 22nd.

Now, the "pattern back then" was YIELDS moved lower after the Fed cut in the shorter-term maturities, and this was a concern of mine for equities. An equity BULL is still looking for is some type of DIVERGENCE from the past. Back then, a lower YIELD and Fed cutting was eventually DOOM for stocks. Right now, I've got a lower YIELD going on in the Treasury market and some are looking for a Fed cut to 1.5% from 1.75%.

Thinking here is if Fed cuts next week, and YIELD go lower, this DIA trade at $88 is a "bull trap." Point and figure pattern terminology has a "bull trap" characterized as "A triple-top-buy signal that only trades 1-box and is then quickly reversed lower into a column of O." Right now I can think of no better place for a bull trap than at bearish resistance trend.

We'll see next week won't we? Personally, I don't see an immediate urgency at this point to be making any bets either way. If holding some GE puts, then hang in there as long as you haven't overleveraged.

 
 
  Jim Brown   8/9/02,  4:38:45 PM
Guess the Dow - The winner on the Dow contest was tlent3192@a.... They guessed 8745.85 and missed it by .40 cents. Good job!!!

The average guess was 8237.20 so this shoots a hole in the consensus theory from last week. We are going to do this one more time.

The contest has been restarted and is ready for your guess for next week. Click here: Link

 
 
  John Seckinger   8/9/02,  4:30:06 PM
Well, hindsight is 20/20, and this illustration of the Dow fully shows the power of technical analysis. Please see chart: Link

 
 
  Jonathan Levinson   8/9/02,  4:00:30 PM
The CBOE put to call reading of .29 has magically disappeared. However, I saw it myself, as did reader Eduardo, and numerous others with whom I correspond. I've never seen a reading get revised by the CBOE, but apparently we have a first. Thanks to reader John for pointing it out to us. The data for the day, (let's hope it doesn't change again) is at Link

 
 
  Leigh Stevens   8/9/02,  3:57:53 PM
Subscriber QUESTION: "It is obvious that there is a line drawn at 8750, even on a light volumn day the bulls are not showing any conviction to get thru. So if this level is not broken between today and monday would you think puts on the Dow and Naz would be a good bet since the Fed probably won't cut rates on Tuesday. Thanks for your great work and have a great weekend! And if 8750 is broken what do you see for an upside before the Fed letdown? "

RESPONSE: Sure, after a run like this, encountering resistance at a "line" of prior highs at Dow 8750 would not be surprising - especially now that the aveage is overbought again on at least a short-term basis. The longer that a resistance is not broken of course, the more it can "cap" a rally and act as a reversal point. However, the consolidation in this area looks like that - a consolidation - and not yet a top formation in terms of price action.

Bearish Price/Stochastic divergence is setting up however on the hourly Dow - minor up trendline is broken on a move below 8700; Support is at 8575, then 8475, basis the hourly chart according to the way I measure it.

 
 
  Jim Brown   8/9/02,  3:56:30 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal at 15:49:12 when the OEX traded below 458. SPX 906.48, DIA 87.26, SPY 91.02, DJX 87.17, NDX 937.93, Compx 1308.95. I would like another -25 point drop on the Dow to throw it back into a negative close but wishes are worthless lately. The reasoning behind this signal is simple. The markets are very overbought and SHOULD react negatively on Monday to more negative Fed press over the weekend. No stop loss on this tonight as I am committed to holding over the weekend.

 
 
  Jim Brown   8/9/02,  3:46:14 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The LONG signal was closed at 15:37:24 with the OEX at 460.00, SPX 911.08, DIA 87.71, SPY 91.45, DJX 87.62, NDX 945.92, Compx 1316.57.

 
 
  Leigh Stevens   8/9/02,  3:40:39 PM
Subscriber QUESTION: "I have noticed that hospitals are going down today: LPNT,TRI,THC,HCA and brokers are rising today: GS,LEH,MER,MWD.

What do you think about support, resistance oscillators and future direction for the broker dealer index (xbd) or any of the health care indexes (HMO,RXP, DRG etc.)?"

RESPONSE: Well, the Health Providers index (RXH.X) retraced a little over 62% of its steep June-July decline - the rebound also occurred in a very short time span. I think the Providers - the stocks you mention - are just now hitting resistance and got overbought - so they are correcting now.

The Broker-dealer index (XBD) presents a much different technical picture - XBD is rebounding from the low end of its down trend channel in a resurging financial sector that got very oversold. This index has retested its recent high today in the 391-392 area. It remains to be seen whether XBD can get above this prior high, but it appears that it can and will run up higher - next resistance in the 403 area at the 50-day moving average, but more major resistance comes in around 430-432.

The Healthcare (HMO) Index broke out to the upside, above resistance implied by its (daily chart) down trendline and looks like it can advance further - its retracement has been far less than the Provider's Index - HMO hits more significant resistance around 586 - last at 566.6.

 
 
  Jim Brown   8/9/02,  3:39:54 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Raise the entry trigger on the SHORT signal to 458. (SPX 908) from the current 453.50. If we get a further breakdown this afternoon I want to go short and hold over the weekend.

DO NOT AUTO EXECUTE THIS TRADE - THIS IS HIGHLY SPECULATIVE

 
 
  Jim Brown   8/9/02,  3:36:54 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the current LONG signal here at OEX 460. Not enough time left to make a major move on current weak internals.

 
 
  Jim Brown   8/9/02,  3:35:54 PM
Swing Trade Signals
I want to clarify my last post. We are at a crossroads in this market. The Dow is at a dead stop at 8760 and the OEX 460. A positive move up from here this afternoon would be very bullish as it would signify a confirmed breakout over previous resistance. I think it would carry over to the open on Monday. If we got a move up to 465 or so I would hold over the weekend looking to sell into a bounce on Monday morning. This would negate my desire to go short over the weekend. I would say my thought process now would be hold the bounce but also short any failure here. A failure below 460 again would tell the bears the coast is clear to pile on at the open on Monday. It would also tell the bulls they are running into a brick wall and they should give up trying until after the Fed meeting. The bottom line: Over 465 we hold over the weekend. between 458-465 we go flat, under 458 we go short.

 
 
  Jonathan Levinson   8/9/02,  3:27:36 PM
We have a p/c ratio being reported at .29 just now. I've never seen it this low, and it spells buying hysteria to me, which, during any other week, would be a good thing to fade. Readings this low can't last very long. Thanks, Eduardo.

 
 
  Jeff Bailey   8/9/02,  3:20:53 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jim Brown   8/9/02,  3:15:00 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
I don't like the action here at 460. The earlier breakout failed to create the momentum and short covering I would have expected. We are now 15 min past the 3:PM turn and internals are weakening slightly. I personally want to go short at the close because the overbought conditions are extreme. Without a positive move really quick I am going to close this position. There will be more stories over the weekend trashing the rate cut possibilities and Monday could be down. Let's raise the stop loss on this signal to OEX 458 (SPX 907) and prepare to go flat or short over the weekend.

 
 
  Jonathan Levinson   8/9/02,  3:07:25 PM
622M to 433M still in favour of declining volume. The TRINQ is flipping back and forth around 1. Given that it comes at the end of the week we've just had, today is a tremendous accomplishment for the bulls. The COMPX hit a high of 1322 and is currently 5 points below that as QQQ tries to hold the 23.50 level.

 
 
  John Seckinger   8/9/02,  3:07:15 PM
Is the bond market (especially September Bonds) telling us equity holders something? With bond futures settling much higher on Friday, I believe this is fixed income traders playing the probabilities that equities will fail to breakout higher. Wrong or right, I believe now is the time to look at volatility plays. Please see chart. Link

 
 
  Mark Whistler   8/9/02,  2:53:15 PM
Reader Questions regarding put/call ratio:
Hi Mark,

1. Could you please let me know the symbol for tracking / charting this?
2. Please give a read on what it could mean today for equities thanks! Denise
We do have a put call symbol for Tradestation, though we are still looking for a symbol on Qcharts. The put/call data can be obtained directly from the CBOE under: intraday data/intraday volume.
The put call ratio is simply a gauge of market sentiment. A high ratio indicates bearishness, where a low ratio indicates bullishness. The "normal" put/call ratio is usually around .70, though lately it has been higher. Regarding today's equities, the current intraday CBOE put/call ratio:

9:00 AM 0.92,
9:30 AM 0.86,
10:00 AM 0.88,
10:30 AM 0.74,
11:00 AM 0.80,
11:30 AM 0.77,
12:00 PM 0.79,
12:30 PM 0.79,
1:00 PM 0.73,
1:30 PM 0.72,

The numbers indicate a bullish attitude that has been developing during the day, as the ratio has been decreasing.

 
 
  Jim Brown   8/9/02,  2:42:26 PM
Swing Trade Signals
Rock and Roll! The advancers finally broke into positive territory and are moving quickly. The indexes are setting new highs as buy stops are hit above that 8750 resistance level. Futures have broken to new highs and showing good strength. The best thing about this breakout is the more than an hour left in the day. Shorts may start scrambling to cover positions if there is no weakness before 3:PM.

 
 
  John Seckinger   8/9/02,  2:38:39 PM
Finally, my "guess the dow" prediction of 8775 was hit. I just wish the market would close now. (grin)

 
 
  Jeff Bailey   8/9/02,  2:38:35 PM
Dow Industrials (INDU) 8,777 +0.77% ... getting upside alert here above 07/30/02 relative high. Looks like bears going to do some short-covering with some upside risk now at 9,000.

 
 
  Jim Brown   8/9/02,  2:36:17 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Finally a successful breakout! That is if you can call 10 points on the Dow successful. The resistance is still here and we are now struggling to hold the high of the day. We were triggered on the LONG signal at 14:29:30 when the OEX traded above 460. SPX 910.20, DIA 87.72, SPY 91.46, DJX 87.57, NDX 948.19, Compx 1316.67. The initial stop loss is OEX 453.50 SPX 899, but if this looks like it is going to fail I may pull the exit trigger early.

 
 
  John Seckinger   8/9/02,  2:32:59 PM
There is slight resistance at 8760 Per 11:59:20 post. Please see chart. Link

 
 
  Jeff Bailey   8/9/02,  2:32:33 PM
Utilities HOLDRS (AMEX:UTH) $70.45 +1.10% ... mentioned this group earlier in the week. Monitoring for a break above $72, but starting to build some gains intra-day. Some upside to $79, with 50-day MA at $74.54 as first hurdle. Link

 
 
  Leigh Stevens   8/9/02,  2:31:59 PM
INDEX Comments: Here they go - OEX is breaking out to new high - now question is what follow through develops.

 
 
  Jonathan Levinson   8/9/02,  2:29:18 PM
Volume breadth has improved significantly on the COMPX, with down volume beating upvolume 524M to 403M as the QQQ hits highs of the day, currently 23.56. Ditto the COMPX at 1315. The TRINQ is into neutral buy territory at .83, and while the TICK.NQ is still negative, I don't expect it to be for long. QQV is down .59. The market seems bent on surprising everybody today- I forget who it was that described it as "The great Humiliator". Very apt.

 
 
  Leigh Stevens   8/9/02,  2:28:06 PM
INDEX Comments: NDX & COMP - on the hourly chart looks like they are trying poke out of this congestion their in and are trying to rally. All the indices are consolidating in tight ranges and are poised to break out, but lack a "spark" with too few buyers around. We'll see what the final hour and half bring. Nothing moving - not a bad consolidation type day however - we've just habituated to the "action" of past weeks!

 
 
  Jim Brown   8/9/02,  2:26:40 PM
Swing Trade Signals
Sure would like to see one more attempt on 8750/459 before the 3:PM turn. A trader would bet that a failure at the level after 3:PM would set the tone for the rest of the day. The bulls need to blast through in the next 36 minutes or hang it up. Advancers are climbing slowly, very slowly.

 
 
  John Seckinger   8/9/02,  2:15:22 PM
With September Bonds (USU2) at 108-18 and now above the top of its regression line, there is once again room for me to speculate about a parabolic move to the upside. This would be definitely defensive towards equities. I did not get the closing conviction the last few times I profiled this possible parabolic move; however, today's close might be different. If bonds weaken in price by just 8 ticks, then it would more neutral. Also, before I speculate I have to determine what part of today's rally in the 30-year was because traders were selling five's to buy long bonds (squaring steepener trade) ahead of the Fed meeting.

 
 
  John Seckinger   8/9/02,  2:08:58 PM
I absolutely agree with Jim. There should be light support at 8700, but this market needs to hold near here for bullish traders. Where did I get 8700? A trend line off the 5-minute chart and near 50 period moving average. I will exit to the sidelines (my bullish conviction) once under 8672.

 
 
  Steven Price   8/9/02,  2:07:04 PM
Reader Question: Hello guys Great job I am new here but in Germany, (not German). What bull debit spreads could or should I be looking at on the Qs, going out to September. Louis

Response: Looking at the QQQ, I see resistance at $24.75, $26.50 and $29.15. Given these levels, the Qs have some humps to get over, so the chances of explosive breakout to the upside are somewhat limited. Therefore using bull spreads probably makes sense , since you are limiting your upside profit potential on a break away, but reducing cost of the long call in a slow move up. Going out to September, I am looking at both August and September call spreads. Selling put spreads accomplishes the same task, but at the moment the equivalent call spreads look like a better deal. In September, upside calls are barely bid, so this limits your ability to spread (why bother limiting your upside for an extra $0.05 from a call sale). Looking at September then, I see the following: Sep 23-27 debit call at $1.40 and Sep 22-26 at $1.90, Sep 24-27 at 0.90. Another way to get bullish on the Qs would be to buy upside time spreads, but when limited to going out to September, then the same issue exists with no significant bids in Aug to sell when buying the September upside call. (Note: time spreads are worth the most when at the strike, so if you buy an upside time spread, it will increase in value as the stock price increases toward the strike)

 
 
  Jim Brown   8/9/02,  2:06:38 PM
Swing Trade Signals
Zapped again! The decliners are advancing again and it appears we got slam dunked at 458 resistance again. Not a good indicator for the afternoon outlook!

 
 
  Jim Brown   8/9/02,  1:59:11 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We can't continue to bounce off that upper resistance forever without the bulls getting the message that there may not be any further gains in this rally. If they finally give up and start moving back to the sidelines then the next down cycle may be starting. I want to put a SHORT signal right under the 1:15 low in case this happens. Even with that last strong bounce the advance/decline line did not make it back to positive territory. Go SHORT the broader market with an OEX trade under 453.50. (SPX 899) Aggressive traders may want to shoot for 456 instead.

 
 
  John Seckinger   8/9/02,  1:55:36 PM
With the Dow being price-weighted, it is noteworthy that shares of American Express (AXP) has broken out to the upside, above its 50 DMA at 35.27. This strength might be a reason the Dow is hanging in there. Sure, only a 1.79 percent gain, but the 3rd leading point gainer for all blue chips - behind C (similar pattern to AXP) and MRK.

 
 
  Jeff Bailey   8/9/02,  1:47:03 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Jim Brown   8/9/02,  1:44:01 PM
Swing Trade Signals
That Dow 8730, OEX 458 resistance is tough. We have been knocked flat like a mosquito at a picnic every time we touch it. I feel like we are flying head first into a bug zapper. Without the Dow breaking 8750 we will continue to be doomed to failure.

 
 
  Leigh Stevens   8/9/02,  1:39:29 PM
Subscriber QUESTION: "Looks like qlgc had an inside day yesterday. Would you verify that and explain how a person should make a play."

RESPONSE: Well, in and of itself, an "inside day" (i.e., daily high & low is within the range of the high & low of the prior day) does not tell you how to play a stock or index. An inside day is often just a "consolidation" day and fairly common.

The technical pattern preceding the decline of today in Qlogic (QLGC), was a bear flag where you had a few days running of slightly higher highs and higher lows that traced out an upward sloping "flag" type formation - this type pattern usually precedes another downswing, which manifested itself today.

As far a future play in QLGC - at today's low of 34.7, stock is getting close to the low end of its trading range of the past few months. Actually until recently, Qlogic was trading between 38 and 52. Then in early-July, the stock extended that range to the downside by brief dip to 33 - last high was in 46 area where 200-day moving average is now. Given the rebound today from its low, QLGC looks to be nearing a buy point. Would buy the stock in 35-33 range.

 
 
  Jonathan Levinson   8/9/02,  1:37:11 PM
Volume breadth continues to favor declining volume better than 2:1, as the COMPX begins another run up, currently 1309. The TICK.NQ has just flipped to positive. MSFT is up .40 in the past 2 minutes, starting to settle back as I type. The TRINQ has fallen to 1.07 on this move, and the QQV is now up just .21 to 50.39. The action in the XAU (up 4.59 on the day) and the price of gold, along with the yields down on the day doesn't look particularly bullish for equities. As well, the ascending channel on the COMPX has been rounding over, possibly a sign of selling to come.

 
 
  John Seckinger   8/9/02,  1:36:33 PM
Ok, now we have another line in the sand for the Dow: 8672. This level should not be penetrated going forward. The 5-minute bullish trendline was penetrated, and it did make a ton of sense to head to the sidelines. I am soo think-headed on this 8775 number, that I resorted to "hope" as the 50 period moving average failed to contain bulls and technicals looked somewhat bleak. Luckily 8672 was quickly taken out to the upside after the move to 8638.

 
 
  Jim Brown   8/9/02,  1:35:22 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Just in case we get a breakout go LONG the broader market with an OEX trade over 460.00. (SPX 910 est) The initial stop loss will be OEX 453.50. (SPX 899 est).

 
 
  Jim Brown   8/9/02,  1:32:50 PM
Swing Trade Signals
The bears may be testing the porridge again to see if it is safe to eat. I was thinking about going short under 454 but the mixed internals still don't rate it a high odds trade. This could be simple profit taking and could reverse into our new trend, the afternoon rally, at any time. If we do get a new bounce back to 458 resistance we will be looking to go long on a breakout.

With the Fed telegraphing a "no cut" posture the bullish sentiment may be fading and short would be the way to go. We had the obligatory three days up and could be facing our next cycle of three days down. Decisions, decisions! The third option is to just stand aside until Monday and hope for another rally attempt before the Fed squashes the bulls hopes on Tuesday. (Stand aside? Who am I kidding - grin)

 
 
  Jim Brown   8/9/02,  1:14:15 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
The end of the bullish sentiment? We were stopped out of the open LONG signal at 13:09:44 when the OEX traded below 454.50. SPX 900.46, DIA 86.60, SPY 90.41, DJX 86.48, NDX 933.50, Compx 1303.80.

 
 
  John Seckinger   8/9/02,  1:12:06 PM
30-year bond (TYX.X) setting a new relative low in terms of yield. Currently at 51.37, a close below 51.52 should be significant. Yes, lower yields mean higher prices and defensive towards equities. As stated before, might be related to Fed meeting next week; nevertheless, still must be watched. Dow just fell underneath 50 period moving average (5-minute chart). If Dow weakness accelerates, I will then start looking at the 30-year bond as a leading indicator.

 
 
  John Seckinger   8/9/02,  12:47:41 PM
The resistance outlined in Post 11:59:20 held a little too well. Nevertheless, the recent weakness in the Dow only brought the index back to its 50 period moving average (5-minute chart). The 22 period average failed to hold (currently at 8686), but might become support if the Dow decides to move higher once more. It is interesting how the five year note is lagging both the 10 and 30-year bond futures. This is most likely position squaring before the Fed meeting, which is exactly why I decided not to pay much attention to the curve today. If wondering, the curve is very "flat" and should be bullish for equities. However, I have a feeling the 8750-8775 range is paramount in traders' minds.

 
 
  Jim Brown   8/9/02,  12:34:44 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
That was a lower low and the Dow broke its morning support. Let's raise the stop loss to OEX 454.50 and look to exit on a further breakdown. (SPX 900)

 
 
  Jonathan Levinson   8/9/02,  12:32:12 PM
The TRINQ and volume breadth, along with 89 new lows and 12 new highs, keep making me think that this is a distribution phase we're seeing. There's a lot of selling going on at these levels, but not enough to stop the ascending price. Only time will tell, but I'd be very careful about getting long and would be snugging up stops on profitable long plays in case the buyers wear out before the sellers.

 
 
  Mark Whistler   8/9/02,  12:31:03 PM
CBOE Equity Index Total Put / Call Ratio Intraday Data for Today Time Ratio 9:00 0.92 9:30 0.86 10:00 0.88 10:30 0.74 11:00 0.80

 
 
  Mark Whistler   8/9/02,  12:26:28 PM
Simple observations: Just thought I'd quickly make note that in the last three days, the U.S. Dollar has moved above the 50-dma for the first time since early March. Will it hold? Support on the 50-dma is at 107.82. Further observations: The Pharmaceutical Index $DRG.X closed above the 50-dma yesterday; it was last above the moving average on March 18th. The S&P Banks Index $BIX.X is testing resistance at the 200-dma, and the 50-dma, though the 50-dma, just recently crossed underneath the 200-dma. The Biotech Index $BTK.X has closed positively above the 50-dma, for the last two consecutive days, potentially a third today.

 
 
  Jonathan Levinson   8/9/02,  12:19:06 PM
Declining volume is now triple advancing volume on the COMPX, with the TRINQ up around 2 and the TICKs negative. The COMPX is at 1308, resting on the lower trendline of its ascending channel. Thanks to Kevin for zooming me out to see an ascending channel instead of a wedge. Looks like it'll be me & Bulkowski for the weekend. The 5(3) stochastic on the 30 minute bars has made a bearish cross, but the 5(3)s are twitchy and I'm waiting for the 60 minute chart to confirm. Direction remains hazy, though Jim's market wrap provided some excellent points of caution on bullish trades. Capital preservation remains job one.

 
 
  Leigh Stevens   8/9/02,  12:11:43 PM
SECTOR Update: Gold & Silver Index (XAU) - Sector is trading 65.5, up over 6% today, continuing its rebound from 55 area and from an oversold level. My initial upside objective for Gold stock sector was 65 - witht he possibility that the sector would have another leg higher and climb back up to its "breakdown" point in 70 area. Currently, XAU is trading right at its 200-day moving average. Clearing this would suggest that sector could retest its 50-day average currently at 72 and falling - beginning of week, 50-day MA was 73.6. My estimate remains that the 70 area or 1-2 points higher is best upside for XAU for a while - I would turn seller in this area.

XAU 14-day stochastic is pointing higher reflecting current upside momentum and is still under 50 - typical overbought reading for XAU is above 80, although rallies can end above 60.

While I was writing this, see that Jeff just updated based on the mails from his fans. See that we have seen many of the same things, proving that great minds think alike - or something.

 
 
  Jeff Bailey   8/9/02,  12:02:27 PM
Gold/Silver Index (XAU.X) $65.64 +6.3% ... sector standout on the upside today. Index is testing 200-day MA right here and may have near-term upside to 50% retracement of $68.95, with further overhead supply at $70. Link

Sector gains largely driven by Newmont Mining (NEM) $26.58 +7.48%. Looking for resistanc at rounding 50-day MA. Link

 
 
  John Seckinger   8/9/02,  11:59:20 AM
Bullish Psychology certain seems to be winning once again. Looking at a 30-minute chart of the Dow, there is a bearish divergence within the RSI; however, I still expect a move above 8750 by session's end. Please see chart: Link

 
 
  Jim Brown   8/9/02,  11:57:13 AM
Swing Trade Signals
Ready for the second attempt! The bulls were knocked back for a 5 yard loss but have regrouped and are ready to try it again. The bears mounted a goal line stand that sacked the bulls offense but it did not blunt their enthusiasm. They need to break through on this attempt or face the prospect of a more substantial drop next time.

 
 
  Jonathan Levinson   8/9/02,  11:48:42 AM
The TICK has gone slightly negative on the COMPX on this pullback, and the TRINQ made it up slightly to 1.54. The TRINQ is telling us that through this entire move there's been selling pressure. However, as the market rises, it's difficult to keep calling it distribution. Price is the only action. Nevertheless, declining volume is still doubling advancing volume, and the QQV is up 1.08 on the day. The opening gap has been filled, and the market will decide where it wants to go next.

 
 
  Jeff Bailey   8/9/02,  11:47:21 AM
The 11:00 AM intraday update has been posted. Link

 
 
  Jim Brown   8/9/02,  11:37:24 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the open LONG signal to our entry point of OEX 453, SPX 897. I don't want to get too close in case we have to drop back and make another running start at 458. It appears to be holding well with advancers continuing to climb.

 
 
  Jim Brown   8/9/02,  11:32:06 AM
Swing Trade Signals
Can't complain about today! We are poised to make that breakout I discussed in the game plan last night. We need the Dow to cross 8750 to make it all happen. The OEX is stuck at the 458 resistance that stopped it yesterday as well. Advance/decline ratio just went positive from a very negative open. I think it is time to raise that stop!

 
 
  Leigh Stevens   8/9/02,  11:29:21 AM
INDEX Comments: QQQ is coming back nicely, but is not yet above trendline resistance at 23.6. COMP - the Composite has been trading above its downtrend channel, which keeps the Nasdaq on a bullish track - next however, COMP needs to clear its prior high at 1354 to suggest a real trend turnaround.

 
 
  Jonathan Levinson   8/9/02,  11:25:44 AM
It seems that I'm seeing ascending wedges all over the place. The latest is on the COMPX 5 minute chart. However, I suspect that I'm squinting a little too hard. The COMPX is printing new highs, currently 1310, as the TRINQ falls off a little more, currently 1.36. The QQV is still in the green after this morning's gap down, currently up 1.34.

 
 
  Leigh Stevens   8/9/02,  11:23:05 AM
INDEX Comments: SPX trading above the top of its hourly down trendline also - still under its prior high at 912, so this is a key area technically. DJX prior hourly peak was 87.6 - DJX (and OEX)not far from challanging its prior swing high. Market action is good in S&P land - correction so far is surprisingly shallow after the size of the run up this week.

 
 
  John Seckinger   8/9/02,  11:21:18 AM
Have you noted the strength in gold index ($XAU)?? Strong move from the opening. What do you think of a longer term entry via options market?

Response: Jeff Bailey is the Gold expert, but I will try to decipher the recent bullish pattern. The technical pattern within the XAU.X is not all that different from the Dow, with the exception that Gold is further along in its breakout. Currently above both the 22 DMA and mid-Bollinger Band, it is my opinion that there might be too much "hope" within traders' minds for the long awaited breakout. No, I would not necessarily take a short here; however, I would do one of two things. First, take a long position here and if the market settles under the 22 DMA, get out. Secondly, wait for a pullback to near 62.50 before going long. I would also go short at 61.50. As far as objectives, longs should look for a move to 71-72 on an intermediate basis. Would I buy in,at, or out-of-the-money calls? I always like at-the-money calls with at least 3 weeks to expiration, but that is purely a personal preference (based on capital requirements, etc.).

 
 
  Leigh Stevens   8/9/02,  11:16:13 AM
INDEX Comments: OEX now trading back above its hourly downtrend channel, still under its prior high at 458 - ability to clear that level is important. A close above this high would break the pattern we've had for weeks, whereby the pattern was lower rally highs always.

 
 
  Steven Price   8/9/02,  11:13:22 AM
Idec Pharmaceuticals (IDPH) 45.82 (+0.97) OI call play IDPH now above recent resistance of $45.35. This graph looks very strong, with the stock right in the middle of its rising channel from the beginning of July. Also a consistent series of higher highs and higher lows.

 
 
  Steven Price   8/9/02,  11:09:40 AM
Johnson and Johnson JNJ $54.43 (-0.14) OI call play dropped along with the rest of market this morning to $53.40, but found support and is now back over $54. The 50-dma of $53.09 appears to be proividing support after yesterday's break above it. The stock has continued its upward trend after fighting through congestion from $50-$52.

 
 
  John Seckinger   8/9/02,  11:09:06 AM
Even without all the five-minute chart trendlines, I decided to do an illustration on the Dow. I think that following shorter moving averages for support should make sense going forward. Please see chart: Link

 
 
  Jonathan Levinson   8/9/02,  11:03:46 AM
Declining volume is almost triple advancing volume on the COMPX, and the TRINQ is down to 1.57 as the COMPX peeks its head above 1300, currently 1304. It was a big spate of buying that moved the COMPX out of its 1290-1300 range. I'm still awfully short on direction for today, as are many traders. Whichever direction you choose, let your stops protect you.

 
 
  Steven Price   8/9/02,  11:02:20 AM
Reader Question: Hi Steve, QCOM has been a personal trading favorite of mine (in either direction). Yesterday I shorted it at 24.64 and got caught in its "bull" run. Obviously, it has come back, consistent with its longer term trend. I am relieved considering where it closed last night. ANy opinion on its current action today? Do you see it breaking down below 25 today? Thanks. Joel

Response: I think we are going to need a pullback in the broader markets today to see QCOM under $25. I still like the stock as a short, however, the current support in the market may leave us waiting. Yesterday's action did lift the stock, but not as much as you would expect if the stock were truly reversing its current pattern. Our stop is $26.50 on the play. I would certainly wait for a break under $25 to add to the position. The triple bottom breakdown on the PnF has the possible exposure of a "bear trap" which is a one box breakdown on a triple, followed by a 3-box reversal. This occurs when the last seller has dumped shares and given up. I don't believe this is the case with QCOM, as the near term prospects for the industry still seem dim. A trade of $27 would be needed for that reversal.

 
 
  Jim Brown   8/9/02,  10:50:47 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the LONG signal at 10:41:50 when the OEX traded above 453. SPX 897.43, DIA 86.50, SPY 90.24, DJX 86.39, NDX 928.37, Compx 1297.53. I would rather it had been triggered on a nice slow uptrend on increased advancers instead of a buy program but we do have a pattern on higher highs and higher lows on all the indexes but the Nasdag and even that index is picking up. I think we have a good signal and we are close enough to 458 resistance that we have a decent chance of a breakout. The initial stop loss is OEX 449, (SPX 890 est)

 
 
  Steven Price   8/9/02,  10:50:36 AM
Reader Question: I previously sent in an email asking about covering a leap. The question being can you? Thank you

Response: The idea of writng a covered call on a leap is used by a number of traders. It is not exactly the same as writing a call on stock, since the leap has a lot of premium and does not move as quickly as stock. If you want to cover a leap while you wait for it to move in your direction, you can do so. Another big difference is that if the "covered" call you sell against the leap goes in the money, you end up with a short stock position against your long call, which is a bearish position, as it is the equivalent of being long a leap PUT. If you sell a nearer term call and it expires worthless, then you have helped pay for the leap you own. When you sell a call against your long stock and the call goes in the money, you simply get the stock called away at the price of the strike you sold and you have no position.

 
 
  Jonathan Levinson   8/9/02,  10:47:01 AM
The COMPX is revving loudly but going nowhere. The TRINQ at 3.5 indicates a lot of selling pressure. Is this a distribution top, or are there more buyers than sellers lined up? Only time is going to tell. In the meantime, the COMPX will continue to chop along in this morning's range.

 
 
  John Seckinger   8/9/02,  10:31:52 AM
Note: Per 09:32:17 Post, USU2 is now above 108.

 
 
  John Seckinger   8/9/02,  10:27:23 AM
One of the reasons why I let the market "trade for a while" before drawing my five-minute chart patterns is because I would like the market to confirm past psychological levels and increase the probabilities of a winning trade. Do I miss a lot of the move? Missing some of the move is expected, but it isn't very common for the market(s) moves straight up or down. Patience can be all the difference in the world. Ok, how does this help a trader right now? Well, the first 30 minutes showed longs liquidating with somewhat of an urgency. It was then important to see how the market would react under 8600. Sure, if things washed out to the 22 DMA I would have missed the entire move, waiting for the settlement to gauge sentiment for Monday. Fortunately, that didn't happen. So, with the liquidation still a threat, the 8575 area should, if at all, only be tested once more. I would prefer 8643 to be tested first, with 8775 still my daily objective.

 
 
  Jonathan Levinson   8/9/02,  10:09:27 AM
The COMPX is trying to pick a direction, bouncing between 1290 and 1300. The TRINQ made it up to over 4.5, but has blown off steam and is now just below 2 as the COMPX approaches 1298, the upper end of this morning's range. QQV is up 1.27 to 51.45 and TICK.NQ, even on this upswing, is still negative.

 
 
  Jim Brown   8/9/02,  10:08:34 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Go LONG the broader market with an OEX trade over 453.00. (SPX 897) The initial stop loss will be OEX 449. SPX 890.

 
 
  Jim Brown   8/9/02,  10:07:43 AM
Swing Trade Signals
We got the new low and the beginnings of a bounce but the a/d line is still flat. If we can set a new relative high and get some improvement in the A/D we could be ready to go. I am going to issue the signal now, which assumes we will get that bounce confirmation.

 
 
  Jim Brown   8/9/02,  9:57:38 AM
Swing Trade Signals
Starting to see some firming but still too early for real confirmation. I would like to see another attempt to set a new low be met with buyers and another bounce attempt set a new relative high.

 
 
  Jeff Bailey   8/9/02,  9:57:20 AM
Qlogic (QLGC) -10% and Brocade (BRCD) -15% both under pressure per Emulex (ELX) -31% forward warning.

 
 
  Leigh Stevens   8/9/02,  9:51:37 AM
Subscriber QUESTION: "I like your recommendation about Diamond & Triangle pattern. Is it possible for you to identify these pattern as it started to form? At these point looks like these pattern are after the fact. Thanks for the excellent work."

RESPONSE: I wish - that I could predict a triangle as it forms, but it can't be "confirmed" until there is a breakout move above it. As soon as there was, on a closing basis (Wed. close), I put it out Wed. night and suggested buying the Thursday opening and/or the first dip, which was an OK trade.

Also, what is potentially "before" the fact is a possible upside target to 98 on DJX, based on the triangle measurement & breakout - time will tell on that - it makes a pretty bullish prediction, but a price target like this does not predict a time frame in which it may happen although it would not be valid for it to take months - more like weeks.

 
 
  John Seckinger   8/9/02,  9:50:34 AM
This may be a moot point; however, it is my opinion that an initial dip followed by strength would be more bullish than an initial rally ending in late day profit taking. The latter would spark talk of merely stops being hit and then a possible failed technical pattern. The 22 DMA in the Dow still remains lower at 8537, while the 50 DMA is trending down from 8895. I still need more time on a five-minute chart to draw a conclusion for today's session; however, 8600 was pivotal before, and the 22 DMA definitely should not be penetrated.

 
 
  Steven Price   8/9/02,  9:48:02 AM
Qualcomm (QCOM): $25.19 (-0.85) OI put play QCOM following repeated pattern of small rebounds following extended drops. Look for a trade under $25 as short entry.

 
 
  Jim Brown   8/9/02,  9:44:24 AM
Swing Trade Signals
Nice drop to support at 450 but where was this profit taking at yesterday's close when we were short? This is a great entry point for a LONG position ONLY if we start to see some strength. The drop has slowed but has yet to turn around. I will be slow to pull this trigger this morning until we get confirmation of any rebound.

 
 
  John Seckinger   8/9/02,  9:32:17 AM
Stating the obvious: Yes, the Nasdaq closed exactly on its 22 DMA and it has been May since the index closed above such an average; nevertheless, I would not be surprised to see bids enter equities on a morning pullback. When will I most likely be wrong? Time to turn to the bond market. Price action in the September Bond above 108 should keep the pressure on equities and cash flowing to fixed income securities for the remainder of the session. Currently at 107-21 (+21 ticks), weakness back down to 107-09 should be the catalyst to turn equities around.

 
 
  Steven Price   8/9/02,  9:31:58 AM
Data storage taking a hit this morning after Emulex lowered guidance for the quarter after the bell yesterday. J.P. Morgan made positive remarks about the hardware sector, although it said a turnaround isn't expected until second half of 2003. As a lifetime Cubs fan, this sounds an awful lot like the annual "wait 'til next year" that keeps repeating itself year after year. It seems just a year ago that companies pointed to the second half of '02 for a recovery.

 
 
  Jonathan Levinson   8/9/02,  9:29:31 AM
Look for COMPX support just above 1300, then at 1297, 1285, and 1260-65.

 
 
  Jeff Bailey   8/9/02,  9:29:14 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Jeff Bailey   8/9/02,  9:27:00 AM
Emulex Corp. (ELX) $23.61 ... stock is going to get hit lower this morning and trading $19.03 over Redibook. Last night, company set sales expectations at plus-or-minus 3% for the current quarter. Goldman Sachs followed by downgrading to "market perform" from its "recommended list" citing disappointing revenue growth outlook and increased competition. Link

Trade at $20 is "sell signal" and would turn vertical count bearish to $15.

 
 
  Jim Brown   8/9/02,  9:23:14 AM
Swing Trade Signals
Suddenly the markets have the rate cut blues. A story today in the WSJ stating the Fed will not cut rates next week is credited with pushing the futures deep into negative territory. Did they read my wrap last night? (grin)

Also, Emulex, ELX, warned that revenues would drop as much as -9% and reminded investors that the economic conditions are still weak. Motorola said it was cooperating with the SEC on a probe regarding to its dealings with Adelphia. Productivity rose better than expected at +1.1% compared to +0.6% estimates. This means employment will remain under pressure as companies continue to produce more with less.

It looks like we are going to get the pullback we needed this morning but with the gloom over no rate cut we don't know if it is going to be a temporary of permanent. drop. We will be looking for signs of strength/weakness after the opening volatility is over to give us a direction.

 
 
  Leigh Stevens   8/9/02,  9:22:43 AM
Pre-Opening INDEX Comments - - In one way of measuring it, OEX broke out yesterday - however, on the hourly charts we closed right AT resistance per my comments and charts at Link - - profit taking on a Friday, after a 9% run up in 3 days - you bet!

Fed Fund futures don't have a 50 basis point cut priced into them - however, hope springs eternal on the Street of Dreams.

Productivity increased only 1.1% in Q2. Compare this to a 8.6% jump in Q1! Weakest increase in workplace efficiency in a year. .

 
 
  Leigh Stevens   8/9/02,  9:14:14 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -9.50 at 896.30; Dow Industrials > -75.00 at 8620; Nasdaq > -13.50 at 935.50

"Fair Value" numbers: S&P 500 futures ($SP02U): .62 -- Nasdaq 100 futures ($ND02U): 2.25

 
 
  Jonathan Levinson   8/9/02,  8:28:36 AM
The US Dollar Index is down to just over 108, and the futures are down with it, NDX -14, S&P -9.3. Gold has been climbing all night and is currently back above $311/oz.

 
 
  Jim Brown   8/8/02,  10:02:02 PM
Swing Trade Game Plan Complete w/Charts- Link

 
 
  Jeff Bailey   8/8/02,  9:14:20 PM
The Market Monitor has been archived. To view today's entries, simply click this Link

 
 

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